More domestic flights could save aviation industry

Saigon Investment
(Saigon Investment) - The Civil Aviation Authority of Vietnam (CAAV) is planning to organize an average of 1,000 domestic flights per day during Tet Lunar New Year holiday period. This is an increase of 28% over the same period last year, on peak days of the Tet Festival there will be 1,200 flights per day, an increase by 25.3% over the same period during last Tet. 

Airlines need supports to seize opportunities when the market recovers. Photo: M.Duy

Airlines need supports to seize opportunities when the market recovers. Photo: M.Duy

However, the new wave of Covid has just emerged, threatening the opportunity to save revenue for the airline industry after a whole year of difficulties due to the unrelenting and ongoing Covid-19 pandemic.

High fares justified

According to the Director of CAAV, Mr. Dinh Viet Thang, because the Covid-19 pandemic is still complicated, on the occasion of Tet Lunar New Year this year all airlines will not exploit international routes but focus on domestic routes only. Therefore, domestic flights on the occasion of Tet Lunar New Year of Tan Suu have increased by 20% to 30% compared to last Tet Lunar New Year of Canh Ty in 2020. Specifically, Vietnam Airlines and Vasco will operate an average of 379 flights per day, an increase of 35.5% since last year, and on peak days there will be 504 flights per day, an increase of 31% since last Tet.

Similarly, VietJet will operate an average of 371 flights per day, which is up by 17% since last year, and on peak days there will be 375 flights per day, up 28% since the same period last Tet. Bamboo Airways also plans to operate 180 flights per day on an average, up by 27.5% since last Tet, and on peak days it will operate with 190 flights per day, up 34% since last year. Pacific Airlines will operate an average of 124 flights per day, more by 25% since last year, and on peak days there will be 130 flights per day, up by 28% since last Tet.

In addition to flights in the daytime, airlines will increase flights at night from 22:00 hours to 07:00 hours the next day, with an average of 140 to 150 flights each night. Up to this point, when Tet Lunar New Year is only ten days away, it is still quite easy to buy plane tickets in Ho Chi Minh City and Hanoi. Although the ticket price for peak days is very high, sometimes as high as VND 7 mn for a round-trip, it has not reached the ceiling price as in previous years.

Representatives of Vietnam Airlines and VietJet shared that even when the domestic market had recovered just before the outbreak of the Covid-19 pandemic, airlines were still showing heavy losses because fares had been pushed down too low. Therefore, the high price now offered by airlines during this coming Tet Lunar New Year will partially compensate airlines after many months of running promotions at record discounts.

However, as the Covid-19 pandemic has just emerged again in Vietnam, the speed of ticket sales has slowed down. The ticket price of the night flight time frame on days from 7 to 9 February is only about VND 1.6 million to more than VND 2 million per turn for HCMC-Hanoi. The nice-time tickets purchased at this time are lower than buying tickets a week ago, about VND 2.2 to 2.5 million per turn. In the afternoon of Hanoi-Ho Chi Minh City, tickets for the peak days after Tet are also available with priced under VND 2 million per turn. Information from the box office also shows that, due to concerns about the Covid-19 pandemic, many passengers who have bought tickets are asking about refund procedures, in case the pandemic is more complicated. This can cause airlines to lose opportunities to recoup revenue.

Some airlines positive

Many signs show that Vietnam's aviation industry has passed the extreme difficult phase. Business results of 2020 of some airlines are all positive. By the end of December 2020, Vietnam Airlines had consolidated revenue of VND 42,523 bn, up by 4.8 % at VND 1,937 bn. The parent company of Vietnam Airlines had estimated revenue of VND 32,983 bn, exceeding the target plan by 1.4% at VND 448 bn. The consolidated loss was at VND 14,445 bn, in which the parent company saw loss of about VND 12,000 bn, less by VND 2,420 bn of target plan. This loss will be reduced by about VND 2,858 bn when completing procedures for amortization adjustment and allocation of repair and maintenance costs in accordance with Government support policy.

Similarly, VietJet also has very positive information on production and business results. In the financial statements of the third quarter of 2020, VietJet only achieved revenue of VND 2,809 bn, a decrease of nearly 80% compared to the same period in 2019 and a loss of VND 971 bn. By the end of 2020, Ms. Nguyen Thi Thuy Binh, Deputy General Director of VietJet, said that this business had escaped losses thanks to many flexible solutions, and changing business methods to suit the new situation.

According to Asso. Prof. Dr. Nguyen Van Phuc of the Institute of Economy, Society, and Technology, positive results of the aviation industry were obtained due to timely support of the Government, the Ministry of Transport, and related agencies. At the same time, airlines have actively sought and implemented solutions to save themselves in a difficult scenario. Solutions such as cutting management costs, cutting staff salaries, restructuring business systems, products and services, shifting from passenger transportation to freight, asset restructuring, and adding financial investment to increase cash and improve solvency, have all proved very effective.

However, experts also believe that the ability of firms to recover depends heavily on the development of the Covid-19 pandemic. If Vietnam continues to control the pandemic well, domestic flights can still be recovered and revenue saved thanks to the peak tourist season of 2021.

Besides, many policies to support aviation businesses still need to be extended beyond 2021 so as to help businesses stand firm, restructure and be ready to compete as soon as the market recovers. 

Bich Quyen

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